3/23/14

Here’s what happened in the SF Commercial and Residential Real Estate Market since 3/18:

 

Our friend Eric Tao of Avant will file a permit for a 259 unit apartment project in Dogpatch at 1201 Tennessee.

 

Trulia is signing a 9 year lease at 535 Mission St. for 79,000 SF of office space. Tulia is rumored to pay between 42 to 52 SF for the space.

 

Oakland skeptics often point out that the empty space on Jack London Square site of the former Barnes and Noble bookstore is proof that the area cannot grow. This argument cannot be used anymore. The 34,000 sq. ft. building is becoming a dining/entertainment center and construction has started. More to come.

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Another major and much larger project is the $1.5 billion Brooklyn Basin project, which we covered last week. It is also possible that Oakland will have a new ballpark next to Jack London Square at the Howard Terminal at the Port of Oakland.

 

TMG Partners sold the Hamm Building at 1550 Bryant St. in San Francisco. Terms of the deal are not yet known. Based on comps we expect the sale price of the 186,000 SF building to be around $600-$700 per SF: 795 Folsom sold for $600 per SF, 410 Townsend sold for $655 and 539 Bryant for $619.

 

82-84 First, a 16,000 SF sold for 22 million or $1,400 a SF. It was one of the last family owned building in the Transbay Area. The Buyer is The Stanford Hotels Group.

 

It is not only Trophy Class A building aka “Skylines” that Fetch $100 or close to $100 per SF in San Francisco: we hear that the People Browser building changed hands for way over $70 per SF…

3/18/14

Here’s what happened in the SF Commercial and Residential Real Estate Market since 2/18:

Following the speculative project Breevast and Kilroy just started at 345 Brannan St.:  295,000-square-foot already leased by Dropbox (see previous entries), 270 Brannan will soon follow: it a 202,000 SF building. It is also likely that Tishman will soon break ground on 598 Brannan, a 700,000 SF building.

We have been saying for the last two years that the Peninsula office building market offers great deals. We toured several Airport Boulevard office buildings two years ago with investors and recommended they pick up these assets at a rock bottom price. Unfortunately, we were not able to convince them but we remind them that since 2013 according to Cassidy Turley over 1M SF of office space has changed hands in the area.

 

832 Sutter on Nob Hill may soon become a 20 unit condo or apartments over retail.

 

The SF Board of Appeals rejected the three appeals brought by the Metropolitan and construction started on 340 and 360 Fremont the site of a 400 foot residential tower (unclear whether there are condos or apartments). We took advantage of the drop in price in the area due to construction to secure a magnificent loft across the street for one of our clients.

 

Ten Capital Management spent $9.56 million or $193 per square foot to purchase a 49,390 SF office building located at 2015 Shattuck Avenue in Berkeley. Readers of this blog know that we’re bullish on Oakland mainly because of its proximity to SF whether it is Residential of Office space. Same rationale applies to Berkeley, which is less than 15 minutes away by Bart from Montgomery Station. The property is office over retail.

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Another hotel changed hands: LaSalle purchased Hotel Vitale in San Francisco for $130M or $650,000 per room.

 

UCSF is leasing a lot of space in Emeryville: including 2100 Powell street. Emeryville has attracted a number of non Biotech companies such as UCSF and Art.com, which has 75.000 SF in the same building at 2100 Powell. Incidentally, we secured some amazing condo deals in Emeryville for our clients and are very bullish on the Emeryville condo market.

 

Hotel G is a 153 room hotel owner and operated by a Honk Kong group which will open shortly on Union Square at 386 Geary.

 

According to the most recent Case Schiller Index, Homes in the SF area are 17.3% below their May 2006 peak. 
Condos are 4.8% of their December 2005 peak. Remember that the Index is Broader than SF itself, nevertheless it is a local index and it is very significant to us that we are for the first time almost at all time peak level. We’re going on record here and forecast a correction. In the SF Bay Area such corrections are mild and are actually great buying opportunities.

 

1028 Market Street will be the site of 186 unit condo over retail on the site of the former Hollywood Billiards. Remember that Shorenstein is building 301 units (apartments) at 1066 Market.

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The Building Industry Association Bay Area dropped its suit against the Metropolitan Transportation Commission and Association of Bay Area Governments author of the: “Plan Bay Area” which calls for adding 188,000 housing units by 2022. Local planning officials are required to use Plan Bay Area as a template when planning growth in their city or making zoning considerations. The law  requires every region in California to draft building and transportation plans in order to cut the emission of greenhouse gases. The Building Industry Association’s argued that Plan Bay Area violated state law by failing to provide for enough housing to accommodate the Bay Area’s projected population and by failing to provide a realistic development pattern to accommodate residential growth. The settlement includes adoption of a new methodology by MTC to account for population, housing and development forecasts.

 

Readers of this blog know how bullish we are on Oakland whether residential or commercial real estate is concerned. The Bond converted rentals into condos mid 2013.  Broadway Grand is sold out. SF is selling new condos at $1000 SF or more vs. $600 or less in Oakland. TWe think Berkeley and Emeryville will follow: Nautilus Group, based in Berkeley spent $18 million about a year ago to purchase three entitled sites and will start construction of 300 units over retail. No news as to whether they are condos or apartments.

Another factor that attracts investors to Oakland is a very responsive City Government. We have first hand experience on the issue: Our Broker was able to quickly meet with Fred Blackwell, the City Administrator and his team to discuss the potential sale of a commercial property. Further, the entitlement process is very short in Oakland: about 6 months maximum and often much less.

 

Private Equity firm Meritage signed a 10 year lease for 40,000 SF at the Ferry building in SF for $100…per SF. There are warehouses in the South of Market commanding $70 per SF. Consequently $100 per SF for a prime office building location on the Water or at the top of Bank of America makes some sense…

InterContinental sold the 383 room Mark Hopkins for $120M.

We are very familiar with the Oakland office building market and have represented tenants and have negotiated with institutional investors such as CIM group who own properties in Oakland. It is clear that from an institutional landlord perspective it is very tempting to purchase Class A office space in Oakland anywhere around for less than $200 per SF instead of SF where $500 per SF is considered a good deal…

 

Pembrook invested $7.5 million in 1155 Market Street, a 143,000 SF office that is undergoing a repositioning.

 

211 Sutter Street a 38,031 square foot office and retail building at Sutter and Kearny sold to a Chinese investor. Terms of the deal are not known.

 

As you know from previous entries, Dropbox leased space at 345 and 333 Brannan totaling almost 300,000 SF, which is in addition to 180,000 SF at China Basin. The Brannan campus is scheduled to be completed in 2015. We hear that Dropbox is paying $50 per SF. Based on this transaction, 535 Mission St., the Transbay Tower, 181 Fremont St. and 222 Second St. should lease rapidly. We hear Trulia is leasing 100,000 SF at 535 Mission.

Our colleague Curbed has again produced a great compilation of the 40 most notable real estate projects in SF (Commercial and Residential). It is a gem:

40SFprojects

 

LEAP is lucky to count as a client a famous SF school. The school real estate market is particularly difficult given the tight regulations that govern the opening of a school. This did not prevent LePort School, a major private school operator from opening a facility at 450 O’Farrell between Jones and Taylor may become the site of a residential tower (condos or apartments).

 

The gas station at Howard and 9th Street may become the site of 120 condos over retail.

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Oakland’s massive $1.5 Billion Brooklyn Basin project broke ground: 3000 housing units in 66 acre including 30 acres of open space.

 

Kron TV is selling 1001 Van Ness and it appears that it will become 112 housing units over retail. No word as to whether it is going to be condo or apartments.

 

1140 Folsom will be 112 units over retail. We don’t know if the developer is planning condos or apartments.

 

Salesforce is about to move into 300,000 square feet in the Transbay Tower at 415 Mission St. The building is over 1000 feet and will be the tallest building in SF. It appears the Tower will be completed early 2017.

 

Divco is purchasing the 490,000 SF Lake Meritt Plaza in Oakland. Terms are not known but they should be close to the comps: 555 12th St. and 1333 Broadway sold for about $280 per SF last year.

 

We pitched the former Caesar restaurant site in North Beach a few years back to our investors who passed. Now the site will host 17 condos over retail.

 

The Delancy Street Christmas tree lot at 2601 Van Ness will become a 27 unit building over retail. Our guess is that it is going to be condos.

My husband and I were selling our farm in the Central Valley and attempting a 1031 property exchange in the Bay Area.  Armand Der-Harcobian was recommended to us and we were privileged to work with him. The exchange would not have succeeded without Armand’s knowledge, expertise, attention to detail, and diligent persistence.  We had 45 days to locate property that would close within 180 days.  Thanks to Armand, we located a beautiful condominium and signed escrow papers in 32 days!  He kept all the agents and mortgage companies working together to make it happen, and was often sending us emails late into the evening.
Armand’s personality is the icing on the cake!  He is warm and kind and especially reassuring during stressful times.  We have referred him to several friends and hope to work with him again.  Armand completely changed our view of Bay Area realtors and we wholeheartedly recommend him!
Thank you Armand!

Carole Collins, Emeryville homeowner

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